Kim Kardashian’s crypto misadventure has landed her in hot water with federal regulators.
The reality TV superstar and influencer has settled Securities and Exchange Commission charges that she failed to disclose a payment she received for touting a crypto asset on her Instagram feed, the agency announced Monday morning.
“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors,” Gary Gensler, chairman of the SEC, said in a news release.
Gensler said the case also serves as a reminder that the law requires celebrities and others to disclose when and how much they are paid to promote investing in securities.
Kardashian, who is reportedly worth $1.8 billion, agreed to pay $1.26 million to settle the charges over a promotion on Meta‘s Instagram for EthereumMax’s crypto asset, the SEC said. She will also cooperate with an ongoing investigation, and has agreed to not promote crypto securities for three years, the regulator added.
However, Kardashian, who has built a media and lifestyle empire, neither admitted to nor denied the regulator’s findings, the SEC said.
In a statement, a lawyer for Kardashian said she is pleased to have resolved the matter.
“Kardashian fully cooperated with the SEC from the very beginning and she remains willing to do whatever she can to assist the SEC in this matter. She wanted to get this matter behind her to avoid a protracted dispute. The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits,” the statement said.
The settlement helped Kardashian avoid a much more intrusive process that might have involved a deposition and document collection, according to attorney Duncan Levin, who has represented convicted fraudster Anna Sorokin, aka Anna Delvey. It also gave the SEC a chance to make an example of a star, he said.
“The SEC is interested in sending a message to other potential celebrity endorsers of securities, to make sure their posts are not misconstrued as financial advice,” said Levin, who also worked as a federal prosecutor and as the head of asset forfeiture in the New York District Attorney’s Office.
Kardashian had already felt regulatory heat over her EthereumMax promo, which she posted on Instagram in June of last year. She started the post by asking her approximately 250 million Instagram followers, “ARE YOU INTO CRYPTO??? THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN.”
Investors sued her, former NBA star Paul Pierce and superstar boxer Floyd Mayweather Jr. earlier this year over their promos for EthereumMax, accusing them of artificially inflating the value of the asset.
The SEC on Monday said Kardashian failed to report that she was paid $250,000 by EthereumMax, through an intermediary, to publish a post about EMAX tokens, a crypto asset offered by EthereumMax. The post, which featured the hashtag “#ad,” included a link to the EthereumMax website, which gives users instructions about how to buy the tokens, the regulator added.
Her failure to disclose the payment was a violation of federal securities laws, the SEC said. She agreed to pay $260,000, which includes the payment she received, plus interest, in addition to the $1 million penalty, the agency added.
“Congress passed a law many decades ago called the Securities Act, and it was to protect the public,” Gensler told CNBC’s “Squawk Box” on Monday morning. “Part of that law said that if you tout a stock you have to disclose if you’re getting paid.”
Read the SEC’s settlement order here.
– CNBC’s Jack Stebbins contributed to this report.